Insurance industry representatives have pushed back at perceptions that firms are “profiteering” during the cost-of-living crisis.
Bosses appeared before MPs sitting on the Treasury Committee to answer questions about rising premiums.
Labour MP Dame Angela Eagle put it to the insurance industry representatives: “There’s a perception out there that insurers are profiteering with the cost of their policies in what’s a very, very difficult time for many, many people, is that perception correct?”
Cristina Nestares, chief executive of Admiral UK told the hearing: “Our internal estimates are more or less estimating that the cost of claims has increased by about 20 to 30%, when you look back at the past three years.
“And then what happens sometimes is that when you sell insurance you sell insurance today to somebody for a 12-month policy.
“But actually, the average of when you pay the claim could be two years.
“First, because the accident can happen in the next 12 months, secondly because when the claim is paid depends on the complexity, if it’s a damage claim, windscreen or maybe if it’s a large bodily injury claim. So on average, it could take two years.”
She said two years’ of inflation “is what you actually need to apply to every policy. Actually you see that we’re not profiteering.”
Doug Brown, chief executive, UK and Ireland Life, Aviva said: “We’ve had increased inflation, which increases the claims, I think we’ve talked about the impact that has on premiums.
“We’ve recently released our first quarter trading results and we have something called a combined operating ratio (a measure of profitability) that we report on.
“That ratio is the same as it was in terms of what we were trying to provide last year … it’s not improving as a result of increasing premiums.”
Charlotte Clark, director of regulation at the Association of British Insurers (ABI) highlighted “significant cost pressures” including costs related to cars.
Dame Angela said she had heard from older people on low fixed incomes whose insurance costs have “soared, massively”.
She also said there is “a perception definitely out there that people have that your customers have, that if people are in flats they are charged a sort of ‘Grenfell premium’ whether they’ve got cladding issues or not.”
Ms Nestares highlighted recent ABI data, indicating that household insurance prices have increased by 6%.
She said: “Now this is only, of course, part of the story because some people, individual cases have bigger increases and that depends on the different circumstances.”